How will Trump Curb Fuel Prices While Sanctioning Iranian Oil Sales?

It is important for US President Donald Trump to hold fuel prices in check during America’s 2018 mid-election season while also keeping his campaign for re-election in 2020 in mind. This will take some juggling, because he is not budging on the decision to clamp US sanctions down on Iranian oil exports on Nov. 4 with penalties for purchasers, although this act is liable to make the energy market skyrocket.

Saudi Arabia, which has the world’s largest reserve of oil, holds the key. Envoys from the US State and Treasury Departments spent three days in Riyadh this week discussing how to pressure nations to stop buying Iranian oil, without disrupting energy markets. Brian Hook, the State Department Director of Policy Planning, led the discussions with Saudi government officials on ways and means for keeping oil markets adequately supplied after the sanctions against Iran kick in.

There will be more discussion on this in the coming weeks. On Wednesday, July 11, Secretary of State Mike Pompeo took advantage of the NATO Summit in Brussels to meet with his British, French and German counterparts. As co-signatories of the 2015 nuclear deal with Iran, all three opted to stay in after Trump’s walkout. Pompeo asked them to continuing seeking amendments to the deal that would expand the nuclear prohibition to Iran’s ballistic missiles, halt its support for the Yemen insurgency and funding of terrorism. However, oil topped their discussions, especially after Pompeo was joined by Brian Hook with an update from Riyadh. Hook went on to talk about the energy issue to senior British, German and French officials.

Oil prices meanwhile cooled somewhat on Wednesday after Pompeo said that the US may provide waivers on the tough sanctions against Iran for countries dependent on its oil. Several US teams visited more than a dozen capitals to seek compliance with the US sanctions and keep the heat on Tehran.

They reported back that China, India and Turkey, among the biggest importers of Iranian oil, may not heed America’’s embargo despite the threat of tough penalties. India has met Washington halfway meanwhile by cutting its oil purchases from Iran by nearly 16 percent. Of course, a prolonged closure of the Strait of Hormuz by Iran could throw the entire calculus out the window.

Trump is at the same time facing a fuel crisis at home, notwithstanding a shale boom. Production rose about 1.6 mb/d since during his time in office and output in 2018 increased by about 400,000 bpd year-to-date. However, Permian bottlenecks could slow added growth in the next year or more as drillers begin to shut off wells. So just when the US is forcing a slowdown in Iran’s oil sales, US shale drillers will be held back by congested pipelines from compensating for the loss. The Trump administration is expected to turn to the Gulf oil emirates for help to bridge this shortfall.

Print Friendly, PDF & Email